Consumers are steering clear of committing to big-ticket items such as furniture and appliances as higher food, fuel, and energy prices have started weighing on household incomes amid prevailing weak economic conditions.
Data from Statistics South Africa (StatsSA) yesterday showed that retail trade sales rose by just 0.1 percent year-on-year in May, slowing down substantially from an upwardly revised 4.3 percent in April.
This retail sales print markedly missed market forecasts of a 1.5 percent growth, and was the smallest gain in retail activity since February.
StatsSA said sales increased only in 2 out of 7 retail divisions, namely general dealers which include supermarkets, and all other retailers which include online stores and retailers specialising in jewellery, stationery and sports goods.
StatsSA’s deputy director for distributive trade statistics Raquel Floris said sales slumped for textiles, clothing, footwear and leather goods, recording its first contraction since December 2020.
Hardware, paint and glass retailers continued their downward momentum, however, contracting for the 11th straight month in May.
“Retailers specialising in hardware, paint and glass recorded the largest decrease in sales, falling by 6.8 percent year-on-year,” Floris said.
“Other retailers that recorded a contraction include those specialising in food and beverages, textile and clothing, pharmaceuticals, medical goods and cosmetics, and household goods.”
The hardware, paint and glass category in particular has seen a marked decline in sales as many companies have mandated a return to the office, reducing demand for DIY and home-enhancement related products.
Investec economist Lara Hodes said the FNB/BER Consumer Confidence Index for the second quarter had already shown a marked drop in confidence which suggested a “slump in consumers’ willingness to spend”.
Hodes said the deceleration in retail sales was further exacerbated by elevated levels of unemployment amid a sluggish labour market.
“The rising cost of living is weighing heavily on already financially stretched consumers, with rising administered and food prices diluting disposable incomes,” Hodes said.
“Moreover, rising interest rates are weighing heavily on the indebted, with the probability of a further 50 basis points rate hike by the South African Reserve Bank in July.
On a monthly basis, retail trade fell by 1 percent in May compared to a revised 0.6 percent increase in April.
However, the retail sector grew by 1.9 percent over the three months to May compared to the same period a year ago.
Nedbank economist Tachin Ramnath said consumers were probably feeling the pinch due to rising living costs and generally weaker economic conditions compared to the same time last year.
Ramnath said there were still many downside risks, as the war in Ukraine keeps commodity prices high, while the resurgence of Covid-19 cases in China could once again worsen supply chain blockages if containment measures are reintroduced.
“(These) factors are visible in deteriorating consumer confidence levels, as the rising costs of essentials continue to erode purchasing power and will negatively impact consumers’ discretionary spending going forward,” Ramnath said.
BUSINESS REPORT